Motus Case Studies

Motus Drives Cost and Inequity Out of Company's Auto Allowance Program

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MOTUS DRIVES COST AND INEQUITY OUT OF FOOD AND BEVERAGE COMPANY'S AUTO ALLOWANCE PROGRAM As one of the nation's largest marketers, sellers and distributors in the food and beverage industry, this leading distributor offers 'single source' solutions to thousands of convenience stores, grocery stores, restaurants and drug store chains. The company's focus on customer service places a premium on their employees' ability to deliver and promote thousands of products daily at the right place and at the right time. In the face of an economic decline, balancing costs with the need to expand became a considerable challenge. Management reviewed innovative business solutions that would help to both reduce costs and improve efficiencies for their drivers. They quickly identified transitioning to a tax-free vehicle reimbursement program as an opportunity to derive tremendous value on both counts. For years the company provided each of its drivers a car allowance of $450 per month for using their personal vehicles for business. When providing employees with a car allowance, the IRS requires that the employer pay FICA taxes on the monthly reimbursement. In addition, federal, state and local taxes must be withheld from the drivers' paychecks. Consequently, there was significant tax "waste," adversely impacting both the company and its employees. "By eliminating payroll taxes and providing a net reimbursement to our employees, we discovered that transitioning to a 100% tax-free program would save us over $2,000 per driver, per year. It would have an immediate and significant impact on our bottom line, without any negative financial impact to our employees," said the Vice President, Finance. "Our previous car allowance did not account for driver-specific factors such as localized pricing, annual business miles driven, territory conditions and geographic cost variances. Because our drivers were spread across the country and incurred different costs for things like fuel and auto insurance, our flat car allowance over-reimbursed some employees and under-reimbursed others. It wasn't equitable and exposed us to risk."

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